Comex gold futures erased earlier losses on Friday as COVID-19 spread globally with a record jump in coronavirus infections in the United States denting risk appetite and setting the precious metal on track for its third straight weekly rise.

The fear of a second-wave of COVID-19 is not driving up gold per se, but rather increasing expectations that governments and central banks may have to provide more fiscal and monetary stimulus to prevent their economies from imploding for a second time.

On Friday, August Comex gold settled at $1780.30, up $9.70 or +0.55%.

Helping to underpin gold was a drop in Wall Street’s major stock indexes and benchmark 10-year Treasury yield. In response, gold gained 1.56% for the week.

Easy monetary policies and a string of stimulus measures by major central banks to stem the virus impact have sparked concerns of inflation, driving bullion prices about 16.5% higher this year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1796.10 will signal a resumption of the uptrend. A trade through $1671.70 will change the main trend to down.

The minor trend is also up. A trade through $1754.00 will change the minor trend to down. This will also shift momentum to the downside.

The minor range is $1796.10 to $1754.00. Its 50% level at $1775.10 is a key pivot level to watch. Based on Friday’s close, it is going to start the week as support.

The short-term range is $1671.70 to $1796.10. Its 50% level at $1733.90 is support.

Short-Term Outlook

Based on Friday’s close at $1780.30, our focus is going to be on the minor pivot at $1775.10. Holding above this level will indicate the presence of buyers. This could lead to a test of $1796.10, putting the market in a positon to accelerate to the upside.

A sustained move under $1775.10 will signal the return of sellers. This could trigger a break into $1754.00. If this fails then the selling will likely extend into the next pivot at $1733.90.

Side Notes

Friday’s price action suggests we’re in a headline driven market so look for heightened volatility. Traders seem to be betting on the government or the Fed to do something to support the economy. Although no one expects to see a full shutdown of the economy, it looks as if there will be pockets of the country where this is going to have to take place. This will slow down the recovery and raise the chances of additional stimulus.

Keep in mind that a steep sell-off in stocks combined with a sharp rise in the U.S. Dollar could actually put a cap on gold so be careful chasing rallies.